AMERICAN ARBITRATION ASSOCIATION

Multiemployer Pension Plan Arbitration Tribunal

In the Matter of the Arbitration between AAA No. 51-621-0021-85-V OOLITE INDUSTRIES, INC. and CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND. ____________________________________/

OPINION OF THE ARBITRATOR

June 23, 1987

After a Hearing Held March 19, 1987 In the Law Offices of Groom and Nordberg, Chartered, at Washington, D.C.

For the Fund: Robert P. Gallagher, Esq. Charles W. Sherman, Jr. Groom and Nordberg, Chartered Suite 700 1775 Pennsylvania Ave., N.W. Washington, D.C. 20006 Also on Brief: Terence G. Craig, Esq. Thomas J. Angell, Esq. Law Department Central States, Southeast and Southwest Areas Pension Fund 8550 W. Bryn Mawr Avenue Chicago, Illinois 60631

For the Company: Herbert B. Mintz, Esq. Muller, Mintz, Kornreich, Caldwell, Casey, Crosland & Bramnick, P.A. Ste. 3600 Southeast Financial Center 200 South Biscayne Boulevard Miami, Florida 33131

I. Decision The Central States, Southeast and Southwest Areas Pension Fund

("Fund") seeks $222,230.09 in withdrawal liability from Oolite Industries, Inc.

("Company"), pursuant to Section 4203(a) of ERISA.1 The Company defends

under the building and construction industry exception in ERISA Sec 4203(b).

Because the Fund improperly applied the definition of "building and

construction industry" contained in Appendix E to the Central States, Southeast

and Southwest Areas Pension Plan ("Plan"), decision is for the Company.

II. References Three references will be used repeatedly: (1) Advance notice of proposed rulemaking by the Pension Benefit Guaranty Corporation ("PBGC") under 29 CFR Part 2646, regarding the definition of "building and construction industry". 47 FR 42588 (No 188, 9/28/82). This reference will be denoted "PBGC Notice" or simply "Notice". Although the PBGC never promulgated a rule pursuant to the Notice, the Notice remains the leading essay on the "building and construction industry" as used in ERISA. (2) Central States Pension Fund v Bellmont Trucking Co, 610 F Supp 1505, 6 EBC (BNA) 2001 (ND Ind, 1985); aff'd 788 F2d 428 (CA 7, 1986), hereinafter "Bellmont Trucking". That case deals with the trucking industry exception found in ERISA Sec 4203(d), which is related to the building and construction industry exception at issue here. (3) Fraser Shipyards, Inc and IAM National Pension Fund, 7 EBC (BNA) 2562 (Arb, 1986), hereinafter "Fraser Shipyards". That opinion discusses the burden of proof in arbitrations under ERISA Sec 4221 and addresses current

1 "ERISA" is the acronym for the Employee Retirement Income Security Act of 1974, PL 93-406, 88 Stat 832, as amended, which is codified in scattered sections of 5, 26 and 29 USC. The portions relevant here may be found in 29 USC Secs 1001 et seq., particularly Secs 1381-1405.

constitutional issues. Additional references will be introduced as needed.

III. The Relevant Statutory Provisions This case arises under Section 4203 of ERISA, Subsection (b) of which

provides in pertinent part:

(1) [I]n the case of an employer that has an obligation to contribute under a plan for work performed in the building and construction industry, a complete withdrawal occurs only as described in paragraph (2), if -- (A) substantially all the employees with respect to whom the employer has an obligation to contribute under the plan perform work in the building and construction industry, and (B) the plan--

(i) primarily covers employees in the building and construction industry, or (ii) is amended to provide that this subsection applies to employers described in this paragraph.

(2) A withdrawal occurs under this paragraph if -- (A) an employer ceases to have an obligation to contribute under the plan, and (B) the employer --

(i) continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required, or (ii) resumes such work within 5 years after the date on which the obligation to contribute under the plan ceases, and does not renew the obligation at the time of the resumption.

The Central States Plan was amended in March of 1982 so as to comply

with ERISA Sec 4203(b)(1)(B)(ii), as follows:

Construction Industry Exemption

Pursuant to 29 USC Section 1383(b)(1)(B)(ii), these rules for withdrawal liability shall not apply to those employers participating in the Plan which perform work in the building and construction industry, and such employers shall be exempt from the assessment of any withdrawal liability. FX 222.

The "substantially all" requirement of ERISA Sec 4203(b)(1)(A) was

incorporated into the Plan by reference in Section 1 of Appendix E [FX 5 & 14].

IV. The Central Issue The principal issue before me is one of contract interpretation, so we

move toward a resolution of that issue as expeditiously as possible. By way of

background, let us review the PBGC Notice.

IV.A. The PBGC Notice As PBGC stated in the Notice, "ERISA does not contain definitions of

the critical terms in section 4203(b): 'building and construction industry',

'substantially all', and 'primarily'." 47 FR 42588 (footnote omitted). At issue in

this arbitration are the meaning of "building and construction industry" and

"substantially all"; the meaning of "primarily" need not concern us because the

Plan was amended to comply with ERISA Sec 4203(b)(1)(B)(ii).

PBGC explained the need for a definition as follows:

"Many construction contractors contribute to plans in which all covered employers are engaged in construction and in which all

2 "FX" denotes Fund Exhibit.

participants work only on the site of construction projects. In these cases, it is clear that the building and construction industry special withdrawal rules apply. However, some pension plans are mixed plans that cover both construction and non-construction employers. Some plans also include employers who are involved in both on-site construction work and off-site activities. Because of these variations, without a definition of 'building and construction industry', plan sponsors may have difficulty determining --

(1) whether their plans are construction plans; (2) whether an individual employer is a construction employer; and (3) when a plan or employer, once so classified, ceases to be eligible for the special rules." 47 FR 42589.

Question (1) is not at issue here because the Central States Plan, although

mixed (see, e.g., Bellmont Trucking, 610 F Supp 1506-1507; 6 EBC 2001-

2002), has been amended to comply with ERISA Sec 4203(b)(1)(B)(ii).

However, question (2) is the key issue with respect to the Company, as much of

its work was off-site. Question (3) is a lesser issue because all available data

yield the same result.

For guidance as to a definition of "building and construction industry",

the PBGC looked to other law:

"Two Federal labor laws, the National Labor Relations Act, as amended (NLRA), and the Davis-Bacon Act, have specific provisions concerning the building and construction industry. In determining the appropriate scope of 'construction' work, both laws emphasize the importance of work actually done at the construction site. " 47 FR 42589 (emphasis supplied).

For purposes of the instant matter, it is important to note the emphasis placed

upon work on-site and the language chosen to implement that emphasis,

because the language of the Central States Plan is different. It also is important

to note with respect to materials and supplies, their furnishing and

transportation, the distinction between work performed by employees of the

supplier or transporter and that performed by other employees.

PBGC examined the NLRA first:

"Under NLRA section 8(f), 'building and construction industry' has been interpreted to exclude employers who manufacture and assemble products which are subsequently installed by the employees of other employers at the construction site. In a section 8(f) case, the NLRB underscored the importance of actual on-site work to the definition: "‘*** the so-called building and construction concept subsumes the provision of labor whereby material and constituent parts may be combined on the building site to form, make, or build a structure.’" 47 FR 42589 (footnotes omitted; first emphasis in PBGC Notice; second emphasis in case cited).

Next, the PBGC examined regulations under the Davis-Bacon Act:

"‘The terms 'building' or 'work' generally include construction activity as distinguished from manufacturing, furnishing of materials, or servicing and maintenance work. The terms include without limitation, buildings, structures, and improvements of all types ***. The manufacture or furnishing of materials, articles, supplies, or equipment *** is not a 'building' or 'work' within the meaning of the regulations in this part unless conducted in connection with and at the site of such a building or work ***’

"‘The terms 'construction', 'prosecution', 'completion', or 'repair' mean all types of work done on a particular building or work at the site thereof *** including without limitation, altering, remodelling, painting and decorating, the transporting of materials and supplies to or from the building or work by the employees of the construction contractor or construction subcontractor, and the manufacturing or furnishing of materials, articles, supplies or equipment on the site of the building or work *** in the construction or development of the project by persons

employed by the contractor or subcontractor ***’ (Emphasis supplied.)" 47 FR 42589 (footnote omitted).

PBGC then quoted a Department of Labor administrative opinion and

noted:

"That opinion also indicates that the Davis-Bacon wage rate decisions apply only to the contractor's or subcontractor's employees that perform work on the site of the construction project. However, employees who normally work off-site at, for example, a factory or tool yard, but who go to the site to perform activities pursuant to the on-site contract, are covered by the Davis-Bacon Act for the actual time worked on-site." 47 FR 42589 (footnote omitted).

PBGC also consulted the Standard Industrial Classification (SIC)

published by the Office of Management and Budget. Under the SIC, "the

installation of prefabricated building equipment and materials, which is

'performed as a service incidental to sale' by employees of the manufacturing

company, is excluded from the construction classification, and instead classified

within the appropriate manufacturing or trade division." 47 FR 42589 (footnote

omitted). PBGC summarized the SIC discussion by commenting that "the SIC

definition of construction, like that under the Davis-Bacon Act and the NLRA,

focuses on work performed by construction employers on the site of a

construction project." 47 FR 42590.

After discussing the NLRA, Davis-Bacon and SIC definitions, PBGC

posed a number of questions which need to be answered in formulating a

definition of the building and construction industry and which are germane to

that employed in the Central States Plan:

"In developing an appropriate PBGC definition for 'building and construction industry', three basic issues would need to be addressed -- -- What is 'construction' work? -- Should the definition be restricted to work actually performed at the site, or should it be broadened to include off-site work? -- If so, what kinds of off-site activities should be included, and under what circumstances? "How should construction work be defined, so as to distinguish it from other industries and other activities, such as manufacturing? In this regard, the previously discussed definitions under other laws provide useful guidance. It is clear under definitions that 'construction' includes the actual on-site erection, alteration and repair of a structure, whether it be an office building, a highway, or a sewer system. However there is other work which is performed at the construction site, but not directly linked to the actual erection of a structure. For example, an on-site food concession presumably would not be considered construction. But what about the delivery of needed materials, or the on-site repair of construction machinery? How should the definition treat those kinds of related, on-site support services? "Once the nature of the work is determined, a second basic question involves whether and where to draw a line between on-site and off-site work. In accord with the Davis-Bacon Act, the definition could be limited only to construction work that is actually performed at the site of the project. By restricting the special withdrawal rules to work done on-site, this option may pose the least risk to the insurance system and may also minimize the need for ad hoc determinations by the PBGC. However, would this approach be likely to upset existing relationships between plans and employers who have traditionally viewed themselves as being in the construction industry? Moreover, [is it] appropriate for the definition to exclude activities of an employer that are closely related to its on-site work (e.g., shop fabrication of materials to be installed at the project site) simply because they are not performed at the construction site? "The definition could be broadened to include off-site work to the extent that work supports an employer's on-site activities. For employers who are engaged in both on-site and off-site construction work, this approach would have the advantage of treating an employer's work as an integrated operation. There may also be benefits to plans, since

employers with off-site as well as on-site operations may be more likely to join multiemployer plans or increase existing operations under this option, as compared to the first option. *** "Therefore if the definition is to include certain off-site work, PBGC may need to specify the kinds of work that are included, as well as other appropriate restrictions. For example, what requirements, if any, should the rule impose on the relationship between an employer's on-site and off-site work where the resulting product was actually erected on-site by employees of a different employer. The rule could also require a particular mix of on-site compared to off-site work. Should these or any other requirements be imposed?" 47 FR 42590.

With these insightful considerations in mind, especially the distinction

between work on-site and off-site and that between work performed by

employees of different employers, let us examine the definition of "building and

construction industry" actually found in the Plan.

IV.B. The Plan's Definition

The building and construction industry, * for purposes of this provision * shall be defined as * all employers * in the construction industry relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, highway, excavation, or other work, * and/or * whose principal business is * the supply * and/or * transportation to and from such job sites * of material, equipment or supplies * to be utilized by any employees performing such construction work. Plan, Appendix E, Sec. 7(b) [emphasis & parsing (*) supplied].3

3 The word, "from," is used in the sense of "a function word to indicate a starting point: as (1) a point or place where an actual physical movement (as of departure, withdrawal or dropping) has its beginning ***," i.e., in the sense of away from. Webster's Third New International Dictionary (Unabridged 1971). Thus the parsing, "supply * and/or * transportation * to and from such job sites" (in which the phrase, "to and from," also modifies "supply"), is rejected, as the grammatical construction, "the supply … from" (in the sense of away from), is not good English. The distinction is of little moment in this particular matter because the Company delivered concrete to jobsites in its own trucks. FX 28, p.2. Cf. "(4) the place of origin, source, or derivation of a material *** thing ***." With this latter meaning, "supply from" would make sense, as the Company supplied ready mixed concrete from its batch plants.

Several observations about this definition are in order. First, it defines the

"building and construction industry" at the employer, rather than at the

employee, level. Second, "supply" and "transportation" are separate and distinct.

Third, it encompasses work done off-site in conjunction with the supply and

transportation of material, equipment or supplies; indeed, supply and

transportation consist mainly of activities performed off-site. Fourth, use of

material, equipment or supplies is not restricted to employees of the supplier or

transporter. Finally, the Plan's definition of "building and construction industry"

has been a source of confusion from its inception.

IV.C. Confusion Over the "Building and Construction Industry"

At the arbitration hearing, the parties presented numerous explications of

the Plan definition, no two of which were alike. The official definition was

adopted at the Board of Trustees' meeting, March 16-17, 1982. On the written

agenda for that meeting was Item No. 17, the explanation for which stated:

At their February 1982 meeting, the Full Board of Trustees determined to adopt an exemption from employer withdrawal liability for all employers in the construction industry. Staff was instructed to develop appropriate plan amendments for compliance with the statute, and the attached resolution includes the amendments necessary for such implementation. Staff recommends adoption of the resolution and amendments, which would exempt from employer withdrawal liability, pursuant to appropriate statutory provision, all employers engaged in on-site construction work and all employers engaged in the transportation of equipment and/or materials to or from such work. FX 22.

The explanation made no mention of "supply" or "supplies" and did not qualify

a covered employer as a "principal" transporter of equipment and/or materials.

The minutes of the March 1982 Board meeting recite that the building

and construction industry Resolution was passed "[a]fter a full discussion." The

language of the Resolution was broader than the explanation of agenda Item No.

17, in that the actual definition included "supply" as well as transportation,

although both activities were required to be "principal".

It appears that the Board of Trustees intended a broad definition of the

"building and construction industry". Paragraph three of the recitals to the

March 16-17, 1982 Resolution begins, "WHEREAS, the Trustees of the Fund

desire to implement this rule in the broadest and most effective manner." In

opening statement, counsel for the Fund indicated that a "fairly broad" definition

was adopted [Tr 14] and the spokesman for the Fund corroborated counsel's

opening statement with his sworn testimony [Tr 65-66].4 The spokesman

testified that the definition was expanded because otherwise too few employers

would have been eligible for the exception [Tr 66].

At the Board's April 1982 meeting, confusion was compounded when the

Board approved a model letter to be mailed to local unions having bargaining

units in the construction industry. The second paragraph of the letter stated:

Please note that the new rules *** exempt any employer in the construction industry whose principal business is the contracting or

4 "Tr" denotes the hearing transcript.

subcontracting of work to be performed at a construction jobsite, or whose principal business is the supply and/or transportation to and from such jobsites of material, equipment, or supplies to be utilized by construction workers. FX 23.

Thus, the model letter (dated April 21, 1982) introduced a requirement not

found in the definition itself, namely, that construction work be a jobsite

contractor's "principal" activity.

A final example of interpretations inconsistent with the language of the

Plan document is furnished by an interpretive bulletin which is sent to

employers who inquire about withdrawal liability. The bulletin states in

pertinent part:

CONSTRUCTION INDUSTRY EXEMPTION

An EMPLOYER is exempt from withdrawal liability if it satisfies all of the following conditions: -- 85% or more of the work for which it is obligated to contribute to the pension plan is either: -- Construction work performed at the construction jobsite; or

-- Transporting construction materials and equipment from the EMPLOYER'S place of business to the construction jobsite; or

-- Transporting construction materials and equipment from the construction jobsite back to the EMPLOYER'S place of business.

*** FX 19. The interpretive bulletin differs from the Plan's definition of "building and

construction industry" in several respects. No mention is made of "supply" or

"supplies" and there is no requirement that a transporter's "principal" activity be

transporting materials and equipment. Moreover, the bulletin requires that

transportation be to or from "the EMPLOYER'S place of business", a condition

not imposed by the Plan document.

From the foregoing, it can be seen that the Plan's definition of "building

and construction industry" has been a source of confusion from its inception.

The Fund has erred in applying the definition to the Company's activities in two

respects: (1) The Fund failed to consider the fact that part of the Company's

business was "the supply *** of material" and (2) the Fund incorrectly applied

the "substantially all" test of ERISA Sec 4203(b)(1)(A) to the Company's job

classifications.

IV.D. The Company's Business To understand how the Fund erred in applying the definition of "building

and construction industry", it is necessary to take a look at the Company, its

business, and the work of its employees. For a quick introduction, it suffices to

quote from the affidavit of Douglas K. Knowles, former President of the

Company:

Oolite, through its three independent operating divisions (Sterling Crushed Stone Division, Redimix Division, and Sterling Prestress Division), was in the business of development and supply of materials and components used in job site building construction.

The sole business of the Redimix Division of Oolite was the supply to building construction contractors and subcontractors of redimixed concrete for integration into the structures being constructed by the employees of the contractors and subcontractors. The end product being supplied (redimixed concrete) was prepared by Redimix Division employees from ingredients obtained from other sources. It was then delivered to the job site by the Redimix Division through a fleet of its own trucks which were operated and maintained by employees of the Redimix Division. At the job site Redimix Division employees assisted in the pour of the concrete and made adjustments to the ingredient mixture as necessary to accomplish the pour in accordance with job specifications. FX 7.

The employees with whom we are mostly concerned here, i.e., those with

respect to whom the employer has an obligation to contribute under the plan for

work performed in the building and construction industry within the meaning of

ERISA Sec 4203(b)(1)(A), are those employed by the Company's Redimix

Division ("Division"). Division employees participated in the Plan by virtue of a

series of collective bargaining agreements between the Company and Local No.

769 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen

and Helpers of America, the last of which was introduced into evidence as part

of FX 7.

The Division had eight classifications of employees: Job Classification/Duties 1. Driver--Deliver concrete to job-sites 2. Mechanic--Provide mechanical support for vehicles 3. Batcherman/Driver--Function as driver and backup batcherman

4. Batcherman--Batch ingredients for concrete mixtures and load mixer trucks 5. Loader/Operator--Operate front-end loader 6. Tireman/Driver--Repair and replace vehicle tires and serve as backup driver 7. Laborer--Keep bins filled with sand and rock, and perform general labor 8. Maintenance--Weld and perform other repairs on batch plants, front-end loaders, and trucks See FX 7, 17; DX 2; Tr 126-140.5

IV.E. The Meaning of "Substantially All" The sole issue is whether "substantially all the employees with respect to

whom the employer has an obligation to contribute under the plan perform work

in the building and construction industry" within the meaning of ERISA Sec

4203(b)(1)(A). As set forth above, "building and construction industry" is

defined in Plan, Appendix E, Sec 7(b). Although the Company ceased to have

an obligation to contribute under the Plan within the meaning of ERISA Sec

4203(b)(2)(A), the parties agree that ERISA Sec 4203(b)(2)(B) will never be

satisfied because:

In January, 1984, Oolite filed with the Internal Revenue Service, pursuant to Internal Revenue Code Section 337, 26 U.S.C. Sec 337, a formal plan for a 12 month liquidation. Under this plan of liquidation and Code Section 337, all assets were to be liquidated within 12 months, with the remainder transferred to a liquidating trust for distribution to remaining stockholders. Pursuant to this plan of liquidation, substantially all of Oolite's assets were sold to a series of unrelated third parties by

5 "DX" denotes an exhibit from the deposition of Douglas K. Knowles, taken January 24, 1987.

January 10, 1985, with the remainder transferred at that date to Southeast Bank, N.A., as liquidating trustee. The assets of the Redimix Division, consisting of two plants, a tract of land and trucks, were disposed of and substantially all operations terminated by mid-September, 1984. Both the single parcel of land and all of the trucks were sold to a series of unrelated third parties. Effective January 10, 1985, (and following name change to "Metro Concrete Company" -- see attached Exhibit 2) Oolite (including the Redimix Division) was formally dissolved and all remaining employees (including the single remaining Redimix Division employee on whose behalf contributions to the Central States Pension Fund were required) terminated. A true copy of the Articles of Dissolution are attached hereto as Exhibit 2. FX 7.

Thus, the Company qualifies for the building and construction industry

exception precisely if "substantially all" of its Division employees worked in the

"building and construction industry"; otherwise, the Company is liable to the

Fund for withdrawal liability under ERISA Sec 4203(a).

As was pointed out in the PBGC Notice, the term, "substantially all", is

not defined in ERISA. The Fund concedes that ERISA does not mandate that

any particular percentage test be used in evaluating "substantially all". However,

the Fund utilizes an 85% test and the Fund argues only that such a test is not

unreasonable. The Company counters that rigid quantification is improper

where, as here, the sample size is small, e.g., fewer than 40 participants.

The Fund appears to be correct. When Congress intended a fixed

percentage test, it had no difficulty in formulating one; see, for example, ERISA

Sec 4205 ("70-percent contribution decline") and Sec 4209 ("3/4 of 1 percent

*** or $50,000"). As it is, Congress left to individual plans (or the PBGC) the

authority to adopt any reasonable measure of "substantially all"; one plan may

utilize an 82.5% test; another, a 90% test; still another, an increasing scale.

Having determined that ERISA does not require a percentage test, I must

agree with PBGC that the phrase, "substantially all", begs for quantification. 47

FR 42591. Indeed, I do not see how a plan sponsor could evaluate "substantially

all" without resorting to a percentage test or numerical count. As a result,

although neither ERISA nor the Plan document provides for a percentage test,

the Fund cannot be faulted for adopting one.

Nor can the Fund be faulted for choosing 85%. Eighty-five percent is

about the only precise figure with any support among the authorities. See, for

example, PBGC Notice, 47 CFR 42591; Bellmont Trucking, 610 F Supp 1509-

1512, 6 EBC 2004-2006; Note, "Trading Fairness for Efficiency:

Constitutionality of the Dispute Resolution Procedures of the Multiemployer

Pension Plan Amendments Act of 1980," 71 Geo LJ 161, 167 & notes 52 & 53

(1982).6 Concededly, support for the 85% figure is based upon the meaning of

"substantially all" under the trucking industry exception of ERISA Sec 4203(d),

but "the same term, when used to describe the same legislative concern in the

same statutory title, should have a single meaning." T.I.M.E.-DC, Inc v N.Y.

Teamsters Pension Fund, 580 F Supp 621, 627, 5 EBC 1097, 1102 (ND NY) 6 To the extent that Bellmont Trucking concludes that "substantially all" must mean "at least 85%", 610 F Supp 1511-1512; 6 EBC 2006, I respectfully disagree.

[citations omitted]; aff'd per curiam 735 F2d 60 (CA 2, 1984). I conclude that

the Fund's use of an 85% standard was not unreasonable.

IV.F. The "Primary Function" Test In applying the 85% test, the Fund staff obtained two sets of data, the first

from Mr. Joe Morele of Teamsters Local 769 and the second from Company

counsel:

Teamsters Counsel Job Classification Data Data Drivers 30 24 Batchermen 2 2 Yardmen (i.e., laborers) 3 or 4 -- Mechanics ___4___ 5__ Total 39 or 40 31 FX 12.

It is unclear what period of time these data cover, but the resolution of this

matter makes a finding unnecessary. The Fund itself brought out the fact that the

Company's work force was quite stable [Tr 158-161], so that data from any

reasonable period probably are representative; see, for example, the data

compiled by the Company [DX 1-4] (5-year averages show 23 drivers, 3

mechanics, 1 batcherman/driver, 1 batcherman, 1 loader/operator, 1

tireman/driver, 2 laborers, 2 maintenance).

In analyzing the data, the Fund staff employed a "primary function" or

"primary focus" test [Tr 17, 214]. They examined each of the Company's job

classifications and determined whether the primary function of the employees in

that classification was the transportation of building material to construction

sites [Tr 214-216]. The staff determined that only drivers had the primary

function of transporting building materials; all other employees were considered

"support personnel" who were not included within the definition of "building

and construction industry" [Tr 64-65, 214-216].

We have now arrived at the crucial issues in this matter:

(1) Did the Fund staff have the authority to apply a "primary function" test so as to exclude "support personnel"?

(2) If so, did the staff correctly apply the primary function test to the Company's job classifications?

Before answering both questions in the negative (obviously a negative answer to

(1) is determinative, but a discussion of (2) is instructive about the

misapplication of the definition of "building and construction industry"), let us

examine the burden of proof in a withdrawal liability arbitration.

IV.G. The Burden of Proof The burden of proof in a withdrawal liability arbitration was discussed at

length in Fraser Shipyards, 7 EBC 2568-2573, and so will only be summarized

here. ERISA Sec 4221(a)(3)(A) provides:

For purposes of any proceeding under this section, any determination made by a plan sponsor under sections 4201 through 4219 and section 4225 is presumed correct unless the party contesting the determination shows by a preponderance of the evidence that the determination was unreasonable or clearly erroneous.

In Fraser Shipyards, it was observed that the notion of showing by a mere

preponderance of the evidence that something is "clear" is somewhat confusing,

if not nonsensical. 7 EBC 2571 & n 19. The phrase, "the party contesting the

determination shows by a preponderance of the evidence", was interpreted to

place the burden of persuasion as to fact and law on the party contesting the

determination (in this case, the Company). Id.

"Clearly erroneous" was held to have the same meaning as in FRCP

52(a). 7 EBC 2571 & n 20. Under the federal rules, findings of fact shall not be

set aside unless the reviewer on the entire evidence is left with the definite and

firm conviction that a mistake has been committed. United States v United

States Gypsum Co, 333 US 364, 395 (1948). "Unreasonable" was related to

conclusions of law, and legal conclusions were held to be unreasonable if:

(1) they are against controlling law, or

(2) if no law is controlling, then they do not represent intelligent choices of legal principles.

7 EBC 2571-2572. "Unreasonable" was further refined to (a) against controlling

law, or (b) unsupported by coherent argument. 7 EBC 2572.

These principles then were combined into a functional formulation of the

burden of proof in a withdrawal liability arbitration: In order to prevail, the party

contesting the plan sponsor's determination must (A) prove to the arbitrator,

definitely and firmly, on the basis of the entire evidence, that a mistake has been

committed, or (B) convince the arbitrator that the determination is against

controlling law or is unsupported by a coherent legal argument. 7 EBC 2572. In

the matter before me, the Company has convinced me that the Fund's

determination is against controlling law; specifically, it is not in accordance with

the Plan document. See ERISA Sec 404(a)(1)(D).7

IV.H. The Fund's Determination Was Unreasonable Using the primary function test, the Plan's Withdrawal Liability Review

Committee determined "that 77% of the work performed by the bargaining unit

involved the transport of ready mix concrete" [FX 13]. According to Plan,

Appendix E [RULES AND REGULATIONS PERTAINING TO EMPLOYER

WITHDRAWAL LIABILITY (Revised July 16-17, 1985)], "[t]he Withdrawal

Liability Review Committee consists of members of Staff of the Fund selected

7 The Company cites the Proceedings of New York University Thirty-Sixth Annual National Conference on Labor, R. Adelman, ed (Matthew Bender 1983) for the proposition that the presumption of ERISA Sec 4221(a)(3)(A) applies only to factual determinations and not to legal conclusions. In Chapter 11, "Arbitration under the Multiemployer Pension Plan Amendments Act of 1980", Edwin M. Jones, Executive Director of the Pension Benefit Guaranty Corporation, states:

In determinations that involve issues of both law and fact, the arbitrator shall separate the two issues and apply the presumptions in favor of trustee determinations only to factual determinations. The arbitrator should not attach any presumptions to legal determinations by the plan sponsor. Id., at 11-10 (footnote omitted).

Mr. Jones' assertion was made without elaboration and with reference only to the statute itself and so begs the question, which concerns the meaning of the statutory language. Until a more definitive analysis is forthcoming, I will continue to apply the statutory presumption as explicated in Fraser Shipyards, 7 EBC 2568-2573. Cf. Herman Segall, Inc and ILGWU Retirement Fund, 3 EBC 2449 (Arb, 1982) in which the arbitrator held that the determination of withdrawal liability, "while not clearly erroneous, is unreasonable as a matter of law." 3 EBC 2455. This holding can be interpreted as implicitly corroborating the holding in Fraser Shipyards that the words, "unreasonable or clearly erroneous", in ERISA Sec. 4221(a)(3)(A) establish a bifurcated standard of arbitral review under which "clearly erroneous" applies to findings of fact and "unreasonable" applies to conclusions of law.

by the Operations Director of the Fund. The Withdrawal Liability Review

Committee is responsible for the review of any matter pertaining to withdrawal

liability which is timely made and the recommendation for decisions on such

matters to the Trustees." FX 14.

At the hearing on March 19, 1987, Mr. Thomas J. Frawley, Director of

the Fund's Plan Compliance Division and a member of the Withdrawal Liability

Review Committee, testified on behalf of the Fund. Mr. Frawley is not a Trustee

and does not customarily attend Board meetings. It appears that the primary

function test is essentially a rule of thumb applied by staff members.8 It is not

embodied in any document. Its use has not been approved by the Board of

Trustees; indeed, there was no evidence that the Trustees are even aware of its

use. In the Company's case, the Withdrawal Liability Review Committee

merely presented to the Board a conclusion reached by application of the test

and did not transmit to the Board the raw data on which the conclusion was

based or inform the Board that the data had been evaluated by utilizing the test

[FX 13].

On the record before me, I cannot find any basis for application of the

"primary function" test, especially not to the Company's job classifications.

Application certainly cannot be inferred from the definition of "building and 8 In its reply brief, the Fund describes the primary function test as only an interpretation of a Plan rule, rather than a rule itself. Reply Brief of Central States, Southeast and Southwest Areas Pension Fund, p 16.

construction industry" which the Trustees adopted. To the contrary, we are told

that the definition was intended to be expansive, and application of the test

serves only to narrow the intended exemption from withdrawal liability. There

is no evidence that the test bears the Board's imprimatur.

The Fund stipulated that the Company's "principal business"9 was the

"supply and/or transportation to and from *** job sites of material *** to be

utilized by any employees performing *** construction work" [Tr 145-147,

195-198]. In fact, "ready mixed concrete" is on the Fund's own list of building

materials [STATEMENT OF BUSINESS AFFAIRS, p 23, FX 17]. Thus, the

Company is entitled to an exemption if 85% of its Division employees were

engaged in the supply and/or transportation of building material. They were,

because there is no basis for excluding them.

The Company presented two witnesses, Douglas K. Knowles, former

President of the Company, and Philip V. Davis, who was with the Division for

27 years. Their testimony was persuasive. Both testified that Division

employees were essential to its operations [Tr 151-152, 186, 205-206] and their

testimony was inherently credible. All of the job classifications for which

contributions were made to the Plan (driver, loader/operator, etc.) involved

typically hardcore, Teamster-type work. If Mr. Knowles had urged that his

9 Mr. Frawley stated that he did not know the meaning of "principal", as the issue had never arisen before.

secretary was a covered employee and that the Company could not have gotten

along without her, there might be some room for skepticism, but he did not.

Rather, he restricted his testimony to key job classifications that were integral to

the supply and transportation to construction sites of ready mixed concrete.

To get the flavor of the evidence before me, it is helpful to take a closer

look at some of the job classifications. Let us look at batchermen and

mechanics. A batcherman operates a batch plant where ingredients are weighed

and loaded into a cement truck for mixing and transport. Depending upon

customer requirements, a batcherman causes appropriate quantities of sand, rock

and cement to be discharged from storage bins into a hopper which feeds into a

waiting mixer truck. But for the work of the batchermen, the Division could

neither supply nor transport concrete because its trucks would be empty.

Absent some formal basis for excluding batchermen from the 85%

calculation, their exclusion is unreasonable. The Fund could only repeat that

their "primary function" was not the transport of concrete to jobsites. It is by no

means clear that that is so because the batchermen loaded the trucks,10 and it is

even less clear that their "primary function" was not the "supply" of ready

mixed concrete. Indeed, it does not appear that the Fund even considered the

Division's role in the "supply" of concrete. Thus, for example, in its Preliminary

10 See Reply Brief of Central States, Southeast and Southwest Areas Pension Fund, p 9.

Statement [FX 28], the Fund says only that "[u]nder Section 7, employers

whose principal business is the transportation of materials to construction sites

are treated as building and construction industry employers," with no mention of

"supply". In its reply brief, the Fund nowhere addresses the issue of the supply

of concrete and states merely that "the Fund definition treats only the

transporting of construction materials to and from jobsites as building and

construction industry work."11

The Fund argues that mechanics were "support personnel" whose

"primary focus" was at the garage, not on the transportation of building material

[Tr 215]. However, the record does not support such a narrow analysis. There

might be some merit to the Fund's position if the mechanics serviced vehicles

from various industries but the evidence was undisputed that they serviced only

vehicles in the "building and construction industry". Mr. Knowles testified that

the mechanics worked exclusively on Division vehicles [Tr 200-201]. He

concluded his testimony by explaining that the objective of the Company's

operation was to move concrete, not to maintain vehicles [Tr 186, 205-206].

The collective bargaining agreement provides some insight as to just how

important maintenance was to Division operations:

No employee shall be compelled to operate equipment which is not mechanically sound and equipped as required by law. It shall be the

11 Reply Brief of Central States, Southeast and Southwest Areas Pension Fund, p 10.

employee's responsibility to report promptly to his supervisor any equipment which is not mechanically sound and properly equipped. If a piece of equipment at the time of any complaint is examined and approved by the Plant Manager or his designated representative, such approval shall be acceptable as prima facie proof that the equipment is mechanically sound and properly equipped under this provision. Once a piece of equipment has been judged unsafe by the Plant Manager, or his designated representative, the Employer shall not ask or require any employee to operate said equipment until it has been repaired properly, signed off as properly repaired by the mechanic doing the work and inspected by a supervisor in the maintenance department to ascertain that the equipment is safe. Agreement, Art. XIX, Sec. 2, FX 7 (emphasis supplied).

At a time when the media abound with warnings about the dangers of unsafe

trucks on our roads,12 it would seem to be almost against public policy to

exclude mechanics from withdrawal liability calculations on the ground that

they are mere "support personnel". Under the "primary function" test, a heavy

construction company could be denied exemption merely because its

management was safety-conscious and employed a large number of

maintenance workers. If such an invidious result is to obtain, it should be

through an express determination by the Fund's Board of Trustees and not the

unhappy accident of the staff's rule of thumb.

ERISA explicitly authorizes the adoption of plan amendments and rules

governing withdrawal liability [e.g., Secs 4214(b), 4219(c)(7)] and the PBGC

12 E.g., 64 Barron's 26-27 (Aug 1984); 27 Handling & Shipping Management T1-13 (Mar 1986); 47 Insurance Review 30-37 (June 1986); The New York Times, December 7, 1986, p 11; The Detroit News, April 14, 1987, p 1B; The Ann Arbor News, May 18, 1987, p 1A.

Notice has been excerpted at length to illustrate the breath of considerations that

a plan may address in formulating a definition of the "building and construction

industry". However, once a plan has adopted a specific definition, it must live

with it. The Central States Plan has done this, and the Fund staff has no

authority to modify or amend the definition which the Trustees selected. The

staff may apply the definition according to its terms, but they may not

emasculate it through administrative practice.

On the record before me, Division employees were engaged in the

building and construction industry within the meaning of Section 7(b) of

Appendix E to the Central States Plan. Thus, the Company qualifies for the

building and construction industry exemption. If the Trustees wish to exclude

"support personnel", they can do so by Plan amendment. They can exclude all

employees whose job is to keep construction equipment in working order or

whose job is to keep supplies of building material on hand. However, to date

they have not done so, and the Fund's staff cannot usurp the Trustees' authority.

Trust Agreement, Art IV, Secs 9 & 14; Art V, Sec 2; Art VII, Sec 3; FX 18.

V. The Fund's Position In its Post-Hearing Brief, the Fund makes four points which I address

seriatim:

V.A. The Fund has consistently treated only jobsite work and transportation as building and construction industry work

First, the Fund seeks to deflect any issue over the term, "supply":

The Arbitrator has asked how the Fund interprets the word "supply" in the second part of section 7(b). March 24, 1987, letter from E. Frank Cornelius, Esq., to Ms. Patricia A. Velasco. Because Oolite did not raise the supply issue and because the Arbitrator's question regarding the meaning of supply came after the conclusion of the hearing, the Fund offered no evidence regarding what was intended by the Trustees by their inclusion of the word supply in section 7(b). Post-Hearing Brief, pp 27-28.

May I respectfully point out that in the affidavit of Douglas K. Knowles,

Company President, quoted earlier, Mr. Knowles stated: "The sole business of

the Redimix Division *** was the supply *** of redimixed concrete ***. The

end product being supplied *** was prepared by Redimix Division employees

***" (emphasis supplied). Mr. Knowles' affidavit was transmitted to the Fund

by letter dated May 28, 1985 [FX 7], in which Company counsel asserted:

As the Supporting Affidavit establishes, the employer in this case meets the Fund's definition of an employer in the "building and construction industry". See Supporting Affidavit Paragraphs 4 and 5. Further, all the employees on whose behalf contributions were required and made were engaged in work performed in the "building and construction industry", in that they were integral to the process of supply and transportation of materials to job sites for utilization by employees performing construction work. As a result, both of the prerequisites to application of ERISA Section 4203(b) to Oolite are present. FX 7 (first emphasis in original; second emphasis supplied).

The Fund advances FX 7 as delineating the issues for arbitration, citing Fraser

Shipyards, 7 EBC 2579. Post-Hearing Brief, pp 15-16. Accordingly, it is

abundantly clear that the Company put the meaning of "supply" at issue almost

two years in advance of the hearing.

Next, the Fund explains:

[T]he Fund has interpreted the words "supply" and "transportation" as meaning essentially the same thing, delivering or transporting (materials, equipment and supplies to jobsites). This interpretation is consistent with common usage of the terms and with accepted dictionary definitions. Post-Hearing Brief, p 28.

Again, I must respectfully disagree. Webster's Third New International Dictionary (Unabridged 1971) defines

supply [vt 2c(1)] as "to provide that which is required or desired by: satisfy the

needs or wishes of: furnish with or as if with supplies, provisions, or equipment

***" and supply (n 3) as "the act, process, or an instance of filling a want or

need or of providing someone or something ***." Webster's defines transport

(vt 1) as "to transfer or convey from one person or place to another: CARRY,

MOVE ***" and transportation (n 1a) as "an act, process, or instance of

transporting or being transported ***" and (n 4b) "public conveyance of

passengers, goods, or materials esp. as a commercial enterprise ***." Neither

definition lists the other word as a synonym; see also Roget's II The New

Thesaurus (Houghton Mifflin 1980). The Fund itself cites Webster's as

authoritative. Post-Hearing Brief, pp 28-29.

The plain dictionary definitions of "supply" and "transportation" compel

the conclusion that they are not synonymous. Their difference may be illustrated

by elaboration upon an example provided by Mr. Frawley, the Fund spokesman,

at the arbitration hearing [Tr 217]:

Q. Could you give an example of a construction, transportation, delivery operation, that would qualify for the exemption?

A. I recall one that they were hauling heavy equipment, a company that had tractor trailers and flat beds and they were hauling things like bulldozers, cranes, various equipment of that type to and from job sites.

The company that hauled the bulldozers, cranes, etc. on its tractor trailers and

flat beds was engaged in the "transportation" of equipment to and from

construction sites, whereas the organization which furnished the bulldozers, etc.

(perhaps an equipment rental outfit or a construction company with idle

equipment) was engaged in the "supply" of construction equipment.

Lastly, the Fund makes a strong pitch that its interpretation of "supply"

and "transportation" as synonymous is at least consistent. Post-Hearing Brief, pp

25-28. A desire for consistency provides no justification for the perpetuation of

error. See Dennard v Richards Group, Inc, 681 F2d 306, 318 (CA 5, 1982)

["being consistently wrong can hardly be sanctioned as right"] (citation

omitted). The Fund unreasonably failed to take into account the fact that

Division employees were engaged in the "supply" of ready mixed concrete.

The only justification which the Fund can propose for the use of both

words is sloppy draftsmanship:

Thus, following a practice not uncommon to lawyers, the Fund

draftsperson used two words with similar meanings, "supply" and "transportation", where arguably one word would have been sufficient.

The Fund's proposal must be rejected for two reasons, (a) fundamental fairness

to participating employers and (b) relative equities.

As was pointed out in the PBGC Notice, 47 FR 42590, a broad definition

of the "building and construction industry" may benefit plans by attracting new

employers. The Fund now seeks to narrow its definition by application of a

"principal function" test and by eliminating the "supply" category. After holding

itself out as having a broad definition, the Fund cannot after the fact contract its

definition so as to ensnare unwitting employers. Having enjoyed the advantages

of a broad definition, the Fund must accept the liabilities. Thus, fundamental

fairness to participating employers requires that the Fund be held to the plain

meaning of the Plan document.13

Even if there were situations in which sloppy draftsmanship might be

overlooked, this would not be one of them. The Central States Plan is one of the

largest multiemployer pension plans in the country (110,000 retirees and

spouses, 320,000 active participants, 35,000 terminated vested). Post-Hearing

Brief, p 3. The Fund is a multi-billion dollar entity [FX 5]. It is in the forefront

of withdrawal liability litigation, as a perusal of the case table of any current

13 One of the main points made in Fraser Shipyards is that a plan sponsor (here, the Board of Trustees) has a duty of good faith and fair dealing toward employers in withdrawal liability matters. 7 EBC 2575-2578.

pension reporter demonstrates, and has the benefit of excellent legal counsel;

indeed, in this matter alone, the Fund has had the benefit of the services of no

fewer than four able attorneys. To suggest that an organization of the Fund's

stature should be indulged for sloppy draftsmanship is an affront to the concept

of responsible pension plan administration.

If a mistake really has been made, the Fund has ample authority and

expertise to correct it. More than five years have elapsed since adoption of the

"building and construction industry" definition and, to date, the Fund has taken

no corrective action. That fact alone seriously undermines the Fund's current

contention that a drafting error has been committed.

V.B. The Fund's definition of the building and construction industry is consistent with the Congressionally intended meaning

The Fund cites two references to MPPAA's14 legislative history15 and

concludes:

Thus, the legislative history indicates Congress' intent that building and construction industry be given the same meaning as has developed under labor-management relations law, specifically the Taft-Hartley Act. Post-Hearing Brief, p 30.

This conclusion is not supported by the statutory language and was rejected by

the Fund's Trustees when they adopted a definition manifestly broader than 14 "MPPAA" denotes the Multiemployer Pension Plan Amendments Act of 1980, PL 96-364, 94 Stat 1208, which principally added the withdrawal liability provisions to ERISA. 15 Sen Comm on Labor and Human Resources, 96th Cong 2d Sess, S 1076 The Multiemployer Pension Plan Amendments Act of 1980: Summary and Analysis of Consideration 14 (Comm Print 1980); HR Rep.869 Part I, 96th Cong. 2d Sess, 76 (1980), reprinted in US Code Cong & Ad News 2943-44.

those utilized in labor-management relations law.

"The statutory language is the most reliable indicator of congressional

intent." Bellmont Trucking, 788 F2d 433 (citation omitted). When Congress

wanted to incorporate principles from other statutes, it did so explicitly, e.g.,

ERISA Sec 4221(b)(3) [title 9, United States Code (US Arbitration Act)].

ERISA Sec 4203(b) contains no reference, either direct or indirect, to the Taft-

Hartley Act. In its Notice, PBGC clearly has rejected any notion that the

definition of building and construction industry as used in ERISA Sec

4203(b)(1) must conform to established interpretations from labor-management

relations law. 47 FR 42590. Moreover, the Fund itself has rejected any such

notion.

On p 41 of its Post-Hearing Brief, the Fund writes:

[T]he offsite production of concrete was not accompanied by the onsite incorporation by Oolite's employees of such concrete into the structure being built, an essential minimum requirement under NLRA section 8(f) for the treatment of offsite production as building and construction industry work.

Such an assertion ignores the plain language of the definition which the Trustees

themselves adopted, "to be utilized by any employees performing such

construction work." Plan, Appendix E, Sec 7(b), FX 5 & 14 (emphasis

supplied). The Fund, having adopted in 1982 a definition well outside the pale

of labor-management relations law, cannot now urge that its definition be

limited by that law.

In its reply brief, the Fund extensively discusses the case law interpreting

the construction industry within the meaning of Section 8(e) of the Taft-Hartley

Act.16 That issue is not before me. Rather, the issue presented is the meaning of

the building and construction industry as set forth in Plan, Appendix E, Sec

7(b), especially the second part thereof.

V.C. Only 70 percent of Oolite's employees performed building and construction industry work

In its Post-Hearing Brief, the Fund explains the operation of the "primary

function" or "primary focus" test as follows:

The Fund applies a "primary focus" test in determining whether employees in a particular job category perform work in the building and construction industry. Tr. at 64-65. Employees are treated as performing work in the building and construction industry only if the primary focus of their job is the type of work the Fund defines as building and construction industry work, i.e., jobsite construction work, or transporting materials to and from jobsites. Tr. at 214. Based upon the job descriptions testified to by Oolite employees at the arbitration hearing ***, it is obvious beyond dispute that only employees in the driver and batcherman/driver categories had as the primary focus of their jobs building and construction industry work. Tr. at 214-16. Post-Hearing Brief, pp 36-37 (footnote omitted).

The Fund's conclusion did not hold up under cross-examination. At first, Mr. Frawley testified that the Fund's definition had never been

interpreted to include support personnel, such as mechanics [Tr 66, 215].

16 Reply Brief of Central States, Southeast and Southwest Areas Pension Fund, pp 3-7.

However, on cross-examination by Company counsel, the following exchange

took place [Tr 217-219]:

Q. Is it your testimony that you would only include within the meaning of "substantially all" and within the meaning of section 7 of your rules, work done at the job site or in the actual transportation?

A. Construction work performed at the job site or transport of materials and equipment to and from the job sites. Q. You would not include functions necessary to the functioning of the truck?

A. No.

Q. The reason being?

A. The primary focus is maintaining the truck.

Q. What about an oiler who works on a job site functioning or oiling a crane and it is his job to take care of the crane to see it doesn't break down. Is he in building and construction work?

A. He might be.

Q. What is the difference between the tire man who makes sure the truck can function and the oiler who makes sure the crane can function?

A. If the oiler that you are referring to is permanently stationed at that construction job site; we would treat him as being employed on job site work.

Mr. Frawley's disparate treatment of the oiler and tire man cannot be justified on

the basis of the language of the Plan document.

The Plan's definition is in two parts, the first pertaining to traditional on-

site construction work and the second pertaining to "supply and/or

transportation" of materials, etc. Cf. Post-Hearing Brief, pp 25-26. If, according

to Mr. Frawley, the crane oiler, manifestly a support person, is encompassed

within the first part of the definition, then there is no basis for excluding him if

he is an oiler on a crane used in the "supply and/or transportation" of material,

etc. That is, the oiler on a crane used to load construction material or equipment

onto trucks for transport to construction sites cannot be excluded if his on-site

counterpart is to be included. The language of the Plan document does not admit

of a distinction between the two.17

If Mr. Frawley's oiler is to be included, then so are the Company's

mechanics, tiremen, etc., because they would be included if they performed

work on-site. Cf. Tr 219. The Fund must accept the fact that the Plan's definition

encompasses activities, "supply and/or transportation", which in major part are

performed off-site. The Trustees have adopted a definition through which they

have rejected the strict on-site nexus of federal labor law.

V.D. Oolite's proposed "interpretation" of the Fund's definition does not withstand analysis

Finally, the Fund complains that the definition of building and

construction industry could be stretched too far:

*** Oolite's proposed interpretation, that would treat those who maintain and service the trucks as performing building and construction

17 Cf. ERISA Sec 4214(b) which provides that "[a]ll plan rules and amendments authorized under this part shall operate and be applied uniformly with respect to each employer ***."

industry work, rests on a proposition that proves too much. Oolite argues that those who service and maintain the trucks must be treated as building and construction industry workers because the trucks, and thus the drivers, could not operate without them. Tr. at 28-29. They are "necessary" for the drivers to do their jobs.

Also necessary for the drivers to do their jobs, of course, are innumerable other categories of employees who worked at Oolite and who work for other employers. Under the proposed interpretation, all of Oolite's employees should be treated as building and construction workers, because they all were presumably "necessary" for the drivers to do their jobs, whether they helped produce concrete, performed payroll and purchasing activities, or performed other activities necessary to maintain Oolite as a going concern. Also necessary for the Oolite drivers to do their jobs, and therefore presumably to be treated as building and construction industry workers, would be those employees of other employers who mined and delivered the rock and sand to Oolite's plants, who manufactured the ready-mix trucks, and so on ad infinitum.

Thus, under Oolite's "necessary" principle, one would surely include within the building and construction industry an on-site food concession, since it is surely as "necessary" to construction work as is the servicing of vehicles that transport construction materials. Such an interpretation offends common sense, and was disapproved by the PBGC in its Advanced Notice of Proposed Rulemaking on the building and construction industry exemption. Ex. 24 at 42590. Post-Hearing Brief, pp 40-41.

It is the Fund, not the Company, which is attempting to over-extend the Plan's

definition.

The matter before me does not concern the Company's suppliers, but

rather the Company's own employees. The Company is not proposing food

concessionaires or payroll clerks for exemption, only classical Teamsters. We

do not refuse to apply an otherwise useful principle merely because it can be

pushed to illogical extremes; rather, we refrain from abusing it. This matter

simply does not present the issue of the permissible outer limits of a definition

of the building and construction industry. The Company's interpretation is well

within the parameters discussed in the PBGC Notice, 47 FR 42590, and well

within the language of the Plan document.18

VI. Refund Under 29 CFR 2644.2(d), the Company is entitled to a refund of all

withdrawal liability payments, with interest.

VII. Procedural Issues The Fund complains that the Company twice failed to respond to requests

for information pursuant to ERISA Sec 4219(a) [FX 2 & 3]. In turn, the

Company insists that it was not informed of the Withdrawal Liability Review

Committee's recommendation to the Board of Trustees, as required by Plan,

Appendix E, Sec 6(a) [FX 5] and as represented in the Fund's correspondence of

June 3, 1985 [FX 8]. We resolve these issues against the Company and in favor

of the Fund.

ERISA Sec. 4219(a) states:

An employer shall, within 30 days after a written request from the plan sponsor, furnish such information as the plan sponsor reasonably

18 Emphatically, this opinion does not say that every building and construction employer satisfies ERISA's "substantially all" requirement; for a counterexample, see Tr 99-100 (two-thirds of employees deliver building materials to construction sites; remainder deliver supplies to manufacturing plants).

determines to be necessary to enable the plan sponsor to comply with the requirements of this part. (Emphasis supplied).

By letter dated November 8, 1984 [FX 2] and again by letter dated December 8,

1984 [FX 3], the Fund requested that the Company complete a detailed

questionnaire about its activities, referred to as a Statement of Business Affairs

[FX 17]. The Company did not bother to complete the questionnaire for two

years [FX 17], suggesting that it never received the requests. However, at the

hearing, the Fund produced certified receipts for both letters [FX 2, 3].

In its Preliminary Statement [FX 28], the Fund urges that "Oolite waived

or forfeited its right to contest the Fund's withdrawal liability assessment against

Oolite." A procedural forfeiture would be draconian, especially considering the

resolution of this matter on the merits. If at all possible, disputes should be

resolved on the merits and procedural violations should be redressed separately,

in order to maintain public confidence in and protect the integrity of the dispute

resolution process. Although declining to apply a waiver or forfeiture, I am

convinced that the Company's initial refusal to cooperate with the Fund put the

Fund to substantial extra and unnecessary cost and expense. Although it is

doubtful that prompt completion of a Statement of Business Affairs would have

completely resolved the current dispute, issues might have become focused

more quickly and been narrowed in the interim.19

The Multiemployer Pension Plan Arbitration Rules for Withdrawal

Liability Disputes sponsored by the International Foundation of Employee

Benefit Plans and administered by the American Arbitration Association

("IFEBP/AAA Rules), pursuant to which this arbitration is conducted

[Appendix E, Sec 6(b)(1)], provide that "[t]he Arbitrator may grant any remedy

or relief within the scope of ERISA." IFEBP/AAA Rules Sec 38. The Trustees

could have sued the Company under ERISA Sec 4301(a)(1) to force compliance

with ERISA Sec 4219(a). In such a case, a court could "award all or a portion of

the costs and expenses incurred in connection with such action, including

reasonable attorney's fees ***." ERISA Sec 4301(e). I conclude that I am

empowered to redress the Fund's complaint.

From an examination of the record, it appears that the Fund may have

incurred as much as five days of extra work because of the Company's failure to

respond to the Fund's lawful requests for information. Multiemployer work is

considered a specialty and is priced at a premium; $125 would be a very

reasonable hourly rate. In order to remain conservative in my estimates, I will

allow the fund two days' attorney's fees at $125 per hour, for a total of $2,000.

19 It is interesting to note the many factors which the Company insists the Fund ought to have taken into account in making its determination. Reply Brief of Oolite Industries, Inc., p 6. The point here is that if the Company had furnished the information requested, the Fund would have been able to do so.

Although it is true that when the Company withdrew from the Plan and at

the time of the Fund's June 3, 1985 letter, Plan rules required that an employer

be notified of the Withdrawal Liability Review Committee's recommendation to

the Board of Trustees, these rules were changed by Board action in July of

1985, to eliminate the requirement of employer notification [FX 14]. The reason

for the change was that no employer had ever responded to such a notice [Tr

110]. It is too much to believe that the Company, which took two years to

respond to a simple request for information, suddenly would have been

galvanized into action and become the first employer in history to respond to a

notice of the Committee's recommendation. Error, if any occurred at all, was

harmless.

VIII. Costs of Arbitration Under IFEBP/AAA Rules Sec 47, equal sharing of expenses is the norm,

and the record does not disclose any reason to deviate from the norm. Although

decision is for the Company, the Fund has acted in good faith. As was pointed

out above, the definition of "building and construction industry" has eluded

PBGC to date, and the Fund's own definition has been a constant source of

confusion. In truth, this appears to be a matter of first impression. Mr. Frawley

testified that he knew of no other arbitration or case involving the Fund's

definition, and neither party has been able to cite any other building and

construction industry arbitration or case, and I know of none. The closest cases

involve the trucking industry, e.g., Bellmont Trucking.

IX. Current Constitutional Issues The disposition of this matter moots the constitutional issues to which the

Company alluded in its Preliminary Statement [FX 27]. These issues were

discussed at length in Fraser Shipyards, 7 EBC 2574-2584. In United Retail &

Wholesale Employees Teamsters Union Local No. 115 Pension Plan v Yahn &

McDonnell, Inc, 787 F2d 128 (CA 3, 1986), the Third Circuit declared ERISA's

arbitral standard of review to be unconstitutional as deficient in procedural due

process; an equally divided Supreme Court affirmed, 55 USLW 4662; 8 EBC

1649 (May 18, 1987) [White, J, did not participate].

The significance of affirmance by an equally divided Supreme Court is

explained in C.A. Wright, Law of Federal Courts, 4th ed (West 1983), p 758 &

n 26:

An affirmance by an equally divided Court leaves the judgment below in effect but it is not of any precedential value.

In Neil v Biggers, 409 US 188, 191-192 (1972), cited in Wright, the Court

elaborated:

[W]e review our cases explicating the disposition "affirmed by an equally divided Court." On what was apparently the first occasion of an equal division, The Antelope, 10 Wheat. 66 (1825), the Court simply affirmed on the point of division without much discussion. Id., at 126-127. Faced with a similar division during the next Term, the Court again affirmed,

Chief Justice Marshall explaining that "the principles of law which have been argued, cannot be settled; but the judgment is affirmed, the court being divided in opinion upon it." Etting v. Bank of the United States, 11 Wheat. 59, 78 (1826). As was later elaborated, in such cases it is the appellant or petitioner who asks the Court to overturn a lower court's decree.

"If the judges are divided, the reversal cannot be had, for no order can be made. The judgment of the court below, therefore, stands in full force. It is, indeed, the settled practice in such case to enter a judgment of affirmance; but this is only the most convenient mode of expressing the fact that the cause is finally disposed of in conformity with the action of the court below, and that that court can proceed to enforce its judgment. The legal effect would be the same if the appeal, or writ of error, were dismissed." Durant v. Essex Co., 7 Wall. 107, 112 (1869).

Nor is an affirmance by an equally divided Court entitled to precedential weight. Ohio ex rel. Eaton v. Price, 364 U.S. 263, 264 (1960).

Biggers was cited with approval in Trans World Airlines, Inc v Hardison, 432

US 63, 73 n 8 (1977).

From the foregoing, it is clear that the split over the constitutionality of

ERISA Sec 4221(a)(3) remains, with the First, Second, Fourth, Ninth and D.C.

Circuits upholding constitutionality, and with the Third Circuit voting against.

Fraser Shipyards, 7 EBC 2574.

X. Findings of Fact and Conclusions of Law

The findings of fact and conclusions of law required by IFEBP/AAA

Rules Sec 37 are included (but not explicitly designated as such) in this opinion.

I thank the parties for their skilled presentations, especially for their

extensive briefs (3 by each side). If I have erred in any respect, it certainly is not

because the parties did not try to point me in the right direction.

DATED: June 23, 1987 ________________________ E. Frank Cornelius